[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/14011.html
   My bibliography  Save this paper

The Impact of Multinationals' Overseas Expansion on Employment at Suppliers at Home: New evidence from firm-level transaction relationship data for Japan

Author

Listed:
  • ITO Keiko
  • TANAKA Ayumu
Abstract
This paper focuses on non-internationalized supplier firms and investigates how the expansion of overseas activities by their main customer firms affects their employment, utilizing a unique dataset that includes information on buyer-supplier transaction relationships for Japanese manufacturing firms for the period 1998-2007. We do not find any negative effects of top buyers' overseas expansion on domestic suppliers' employment. Instead, we find a significant positive effect. Our result implies that, contrary to fears of a potential hollowing out of domestic supporting industries, the expansion of overseas activities of customer firms has a positive impact on suppliers' employment. Expansion of overseas production by downstream firms may increase purchases from upstream firms in Japan, and this would be the case if downstream firms can increase their worldwide sales by expanding overseas production. Therefore, our result suggests that having a transaction relationship with successful downstream multinational firms that expand their global sales through overseas production is important for non-internationalized suppliers in Japan.

Suggested Citation

  • ITO Keiko & TANAKA Ayumu, 2014. "The Impact of Multinationals' Overseas Expansion on Employment at Suppliers at Home: New evidence from firm-level transaction relationship data for Japan," Discussion papers 14011, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:14011
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/14e011.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Blomstrom, Magnus & Fors, Gunnar & Lipsey, Robert E, 1997. "Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden," Economic Journal, Royal Economic Society, vol. 107(445), pages 1787-1797, November.
    2. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 35-78.
    3. repec:bla:reviec:v:9:y:2001:i:1:p:108-22 is not listed on IDEAS
    4. Alexander Hijzen & Sébastien Jean & Thierry Mayer, 2011. "The effects at home of initiating production abroad: evidence from matched French firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(3), pages 457-483, September.
    5. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 43(3), pages 135-148, May.
    6. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," Journal of International Economics, Elsevier, vol. 68(1), pages 219-237, January.
    7. Debaere, Peter & Lee, Hongshik & Lee, Joonhyung, 2010. "It matters where you go: Outward foreign direct investment and multinational employment growth at home," Journal of Development Economics, Elsevier, vol. 91(2), pages 301-309, March.
    8. repec:bla:reviec:v:8:y:2000:i:3:p:448-61 is not listed on IDEAS
    9. Bruce A. Blonigen, 2019. "In Search of Substitution Between Foreign Production and Exports," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 9, pages 293-323, World Scientific Publishing Co. Pte. Ltd..
    10. Henrik Braconier & Karolina Ekholm, 2000. "Swedish Multinationals and Competition from High‐ and Low‐Wage Locations," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 448-461, August.
    11. Eaton Jonathan & Tamura Akiko, 1994. "Bilateralism and Regionalism in Japanese and U.S. Trade and Direct Foreign Investment Patterns," Journal of the Japanese and International Economies, Elsevier, vol. 8(4), pages 478-510, December.
    12. Tomiura, Eiichi, 2003. "The impact of import competition on Japanese manufacturing employment," Journal of the Japanese and International Economies, Elsevier, vol. 17(2), pages 118-133, June.
    13. Robert E. Lipsey, 1995. "Outward Direct Investment and the U.S. Economy," NBER Chapters, in: The Effects of Taxation on Multinational Corporations, pages 7-42, National Bureau of Economic Research, Inc.
    14. Yamashita, Nobuaki & Fukao, Kyoji, 2010. "Expansion abroad and jobs at home: Evidence from Japanese multinational enterprises," Japan and the World Economy, Elsevier, vol. 22(2), pages 88-97, March.
    15. Paprzycki,Ralph & Fukao,Kyoji, 2012. "Foreign Direct Investment in Japan," Cambridge Books, Cambridge University Press, number 9781107411289.
    16. Keith Head & John Ries, 2001. "Overseas Investment and Firm Exports," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 108-122, February.
    17. Nishitateno, Shuhei, 2013. "Global production sharing and the FDI–trade nexus: New evidence from the Japanese automobile industry," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 64-80.
    18. Magnus Blomstrom & Robert E. Lipsey & Ksenia Kulchycky, 1988. "U.S. and Swedish Direct Investment and Exports," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 257-302, National Bureau of Economic Research, Inc.
    19. repec:hhs:iuiwop:490 is not listed on IDEAS
    20. Belderbos, René & Wakasugi, Ryuhei & Zou, Jianglei, 2012. "Business groups, foreign direct investment, and capital goods trade: The import behavior of Japanese affiliates," Journal of the Japanese and International Economies, Elsevier, vol. 26(2), pages 187-200.
    21. Giorgio Barba Navaretti & Davide Castellani & Anne-Célia Disdier, 2010. "How does investing in cheap labour countries affect performance at home? Firm-level evidence from France and Italy," Oxford Economic Papers, Oxford University Press, vol. 62(2), pages 234-260, April.
    22. Lipsey, Robert E & Weiss, Merle Yahr, 1981. "Foreign Production and Exports in Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 488-494, November.
    23. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    24. Robert E. Baldwin, 1988. "Trade Policy Issues and Empirical Analysis," NBER Books, National Bureau of Economic Research, Inc, number bald88-2.
    25. WAKASUGI Ryuhei & TODO Yasuyuki & SATO Hitoshi & NISHIOKA Shuichiro & MATSUURA Toshiyuk & ITO Banri & TANAKA Ayumu, 2008. "The Internationalization of Japanese Firms: New findings based on firm-level data (Japanese)," Discussion Papers (Japanese) 08046, Research Institute of Economy, Trade and Industry (RIETI).
    26. Lipsey, Robert E & Weiss, Merle Yahr, 1984. "Foreign Production and Exports of Individual Firms," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 304-308, May.
    27. S. Lael Brainard & David A. Riker, 1997. "Are U.S. Multinationals Exporting U.S. Jobs?," NBER Working Papers 5958, National Bureau of Economic Research, Inc.
    28. Joachim Wagner, 2011. "Offshoring and firm performance: self-selection, effects on performance, or both?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(2), pages 217-247, June.
    29. TANAKA Ayumu, 2012. "The Effects of FDI on Domestic Employment and Workforce Composition," Discussion papers 12069, Research Institute of Economy, Trade and Industry (RIETI).
    30. Castellani, Davide & Mariotti, Ilaria & Piscitello, Lucia, 2008. "The impact of outward investments on parent company's employment and skill composition: Evidence from the Italian case," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 81-94, March.
    31. EDAMURA Kazuma & Laura HERING & INUI Tomohiko & Sandra PONCET, 2011. "The Overseas Subsidiary Activities and Their Impact on the Performance of Japanese Parent Firms," Discussion papers 11069, Research Institute of Economy, Trade and Industry (RIETI).
    32. WAKASUGI Ryuhei & TODO Yasuyuki & SATO Hitoshi & NISHIOKA Shuichiro & MATSUURA Toshiyuki & ITO Banri & TANAKA Ayumu, 2008. "The Internationalization of Japanese Firms: New Findings Based on Firm-Level Data," Discussion papers 08036, Research Institute of Economy, Trade and Industry (RIETI).
    33. Ana L. Revenga, 1992. "Exporting Jobs?The Impact of Import Competition on Employment and Wages in U. S. Manufacturing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 255-284.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mitsoyo Ando & Fukunari Kimura, 2015. "Globalization and Domestic Operations: Applying the JC/JD Method to Japanese Manufacturing Firms," Asian Economic Papers, MIT Press, vol. 14(2), pages 1-35, Summer.
    2. Endoh, Masahiro, 2022. "The impact of firms’ international trade on domestic suppliers: The case of Japan," Journal of the Japanese and International Economies, Elsevier, vol. 63(C).
    3. INUI Tomohiko & KODAMA Naomi, 2016. "The Effects of Japanese Customer Firms' Overseas Outsourcing on Supplier Firms' Performance," Discussion papers 16106, Research Institute of Economy, Trade and Industry (RIETI).
    4. Goya, Daniel, 2021. "The network effect of Chinese competition on what domestic suppliers produce," Economic Modelling, Elsevier, vol. 102(C).
    5. Daniel Goya, 2019. "Chinese competition and network effects on the extensive margin," Working Papers 2019-01, Escuela de Negocios y Economía, Pontificia Universidad Católica de Valparaíso.
    6. HAYAKAWA Kazunobu & MATSUURA Toshiyuki, 2017. "Overseas Production Expansion and Domestic Transaction Networks," Discussion papers 17085, Research Institute of Economy, Trade and Industry (RIETI).
    7. Masahiro Endoh, 2020. "The Impact of Firms' International Trade on Domestic Suppliers," Keio-IES Discussion Paper Series 2020-016, Institute for Economics Studies, Keio University.
    8. ANDO Mitsuyo & KIMURA Fukunari, 2017. "Job Creation and Destruction at the Levels of Intra-firm Sections, Firms, and Industries in Globalization: The case of Japanese manufacturing firms," Discussion papers 17100, Research Institute of Economy, Trade and Industry (RIETI).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Keiko Ito & Ayumu Tanaka, . "Expansion of Overeas Production and the Impact on Employment in Domestic Supporting Industries: An Empirical Analysis Based on Buyer-Supplier Transaction Relationships," Chapters, in: Chine Hee HAHN & Dionisius Narjoko (ed.), Impact of Globalization on Labor Market, chapter 9, pages 232-284, Economic Research Institute for ASEAN and East Asia (ERIA).
    2. Chin Hee Hahn & Yong-Seok Choi & Sadayuki Takii & Dionisius Narjoko & Rafaelita M. Aldaba & Shandre M. Thangavelu & Archanun Kohpaiboon & Juthathip Jongwanich & Alfons Palangkaraya & Cassey Lee & Keik, . "Impact of Globalization on Labor Market," Books, Economic Research Institute for ASEAN and East Asia (ERIA), number 2012-rpr-04 edited by Chine Hee HAHN & Dionisius Narjoko, August.
    3. NI Bin & KATO Hayato & LIU Yang, 2020. "Does It Matter Where You Invest? The Impact of FDI on Domestic Job Creation and Destruction," Discussion papers 20008, Research Institute of Economy, Trade and Industry (RIETI).
    4. Amiti, Mary & Wakelin, Katharine, 2003. "Investment liberalization and international trade," Journal of International Economics, Elsevier, vol. 61(1), pages 101-126, October.
    5. James R. Markusen & Keith E. Maskus, 2001. "General-Equilibrium Approaches to the Multinational Firm: A Review of Theory and Evidence," NBER Working Papers 8334, National Bureau of Economic Research, Inc.
    6. Nishitateno, Shuhei, 2013. "Global production sharing and the FDI–trade nexus: New evidence from the Japanese automobile industry," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 64-80.
    7. Heather Berry, 2010. "Why Do Firms Divest?," Organization Science, INFORMS, vol. 21(2), pages 380-396, April.
    8. Raphaël Chiappini, 2016. "Do overseas investments create or replace trade? New insights from a macro-sectoral study on Japan," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(3), pages 403-425, June.
    9. Kazunobu Hayakawa & Toshiyuki Matsuura & Kazuyuki Motohashi, 2016. "How Does FDI Affect Productivity at Home?: Evidence from a Plant-Level Analysis," Journal of Industry, Competition and Trade, Springer, vol. 16(4), pages 403-422, December.
    10. Tanaka, Ayumu, 2013. "The causal effects of exporting on domestic workers: A firm-level analysis using Japanese data," Japan and the World Economy, Elsevier, vol. 28(C), pages 13-23.
    11. Riccardo Crescenzi & Roberto Ganau & Michael Storper, 2022. "Does foreign investment hurt job creation at home? The geography of outward FDI and employment in the USA," Journal of Economic Geography, Oxford University Press, vol. 22(1), pages 53-79.
    12. Hayakawa, Kazunobu & Matsuura, Toshiyuki & Motohashi, Kazuyuki & Obashi, Ayako, 2013. "Two-dimensional analysis of the impact of outward FDI on performance at home: Evidence from Japanese manufacturing firms," Japan and the World Economy, Elsevier, vol. 27(C), pages 25-33.
    13. Mitsuo Inada & Yung-Hsing Guo, 2016. "Heterogeneous Impacts of a Change in Chinese FDI Regulations on Domestic Market Outcomes: Empirical Evidence from Taiwanese Plant Data," KIER Working Papers 934, Kyoto University, Institute of Economic Research.
    14. LIU Yang & NI Bin, 2018. "Outward Foreign direct investment and Firm-level Employment Dynamics in Japanese Manufacturing Firms," Discussion papers 18069, Research Institute of Economy, Trade and Industry (RIETI).
    15. Palle S. Andersen & P. Hainaut, 1998. "Foreign direct investment and employment in the industrial countries," BIS Working Papers 61, Bank for International Settlements.
    16. Goh, Soo Khoon & Wong, Koi Nyen & Tham, Siew Yean, 2013. "Trade linkages of inward and outward FDI: Evidence from Malaysia," Economic Modelling, Elsevier, vol. 35(C), pages 224-230.
    17. Giorgio Barba Navaretti & Davide Castellani & Anne-Celia Disdier, 2006. "How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy," Development Working Papers 215, Centro Studi Luca d'Agliano, University of Milano.
    18. Kokko, Ari, 2006. "The Home Country Effects Of Fdi In Developed Economies," EIJS Working Paper Series 225, Stockholm School of Economics, The European Institute of Japanese Studies.
    19. Altuzarra, Amaia & Bustillo, Ricardo & Rodríguez, Carlos, 2018. "Much ado about nothing: No fear of becoming a multinational," International Business Review, Elsevier, vol. 27(1), pages 56-65.
    20. Lundan, Sarianna M., 2007. "The Home Country Effects of Internationalisation," Discussion Papers 1100, The Research Institute of the Finnish Economy.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:14011. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.